Indonesian Ownership of Land

Jun 205 mins

After incorporating a company in Indonesia, some businesses may look to purchase and own the land for their operations. A foreign-owned firm (PMA) can acquire land in two ways, according to Indonesian law, which are:

  • Acquisition of unregistered and uncertified land

  • Acquisition of registered land is another

Certified and Uncertified Land in Indonesia

In Indonesia, all lands are divided into two categories:

  • Private land

  • Public land

For private lands, the Basic Agrarian Law established a system of land rights classification and registration. The BPN will then create and issue land certificates as a proof of legal ownership of land in Indonesia.

The details in the certificate include:

  • Land title rights

  • Titleholder’s name

  • Land acreage

  • Title period

  • Issue date

  • Security concerns of the land (if any)

How to Acquire Land in Indonesia

A PMA must first get a location permit before acquiring land unless the firm is excluded from the requirement in certain conditions. A placement permit enables a PMA or any other firm to purchase land and get a title to it. The PMA can acquire land with the use of a location permission.

Acquiring unregistered land in Indonesia is more difficult than registered land acquisition as conducting a thorough background investigation of the land’s history can be a challenge. As part of the background check, these information, among others, will be investigated:

  • History of legal ownership of the land

  • Connected environmental documentation

The most common method of acquiring unregistered land is through a private sale between a landowner and a buyer. However, it should be noted that a deed of transfer signed in front of a certified land-deed official (PPAT) at the location of the land is required for registration with the relevant land office.

On the other hand, acquisition of registered land is usually done through a deed of transfer in front a PPAT at the location of the land. This is to be followed by the registration and recording of the transfer with the relevant land office.

Land checks for registered land are usually conducted at the district courts and the relevant National Land Agency (BPN) office before the transfer is completed. These checks enable prospective landowners to appropriately manage any existing disputes as well as assess the history of transfers of the land in question.

Basic Agrarian Law in Indonesia

The Basic Agrarian Law governs land and property in Indonesia. This important piece of legislation incorporates customary (ADAT) laws as well as rules enacted by Dutch colonial rulers. ADAT rules governed land registration for Indonesians before the Basic Agrarian Law was enacted, as did Dutch colonial regulations for foreigners.

As a result, the Basic Agrarian Law was enacted to provide a single regime that would abolish the two laws that controlled land matters while also preserving some of the principles relevant to land ADAT laws.

The government has the authority to decide the objectives for which land will be utilized, the relationship between land and persons or groups of individuals, and the repercussions of legal actions affecting land, according to the Basic Agrarian Law.

Corporate Secretarial checker

What are the Land Rights in Indonesia

The land rights in Indonesia include:

1. Rights of ownership

The right of ownership is a right that provides a landowner with complete rights over owned land in Indonesia. There is an expiration date imposed on the ownership of the land. Only Indonesian citizens and businesses are entitled to the right of ownership.

However, these businesses do not include locally owned companies (PTs) or foreign-owned companies (PMAs). If it happens that the holder of the right of ownership is a foreigner who owns a PMA, the foreigner must convert the right of ownership into other rights.

2. Rights to build

The right to build is the most common land right which is often owned by PMAs which are based in Indonesia. The right to build is a right related to state land. It allows its holder to use the land to construct specific buildings.

The right to build is granted for anywhere up to 30 years; it can also be renewed for up to 20 years. The right to build may be held by either individuals or business entities and can be transferred to other eligible third parties for as long as it is active.

3. Rights to cultivate

The right to cultivate is a right related to state land which allows its holder to use the land in question for agricultural purposes. This has a validity of anywhere between 25 and 35 years, with renewals extending the validity by up to 25 years.

4. Rights of management

The right of management is a government-granted privilege where it gives its owner land control. Only the following entities have this privilege:

  • National and regional government agencies

  • State-owned corporations

  • Regional government-owned firms

  • Limited liability state-owned enterprises

  • Special-authority agencies

  • Government-affiliated legal entities

State-owned corporations may sell linked land to PMA corporations using their right of management. The state-owned firm and the PMA company concerned will become part of a cooperation arrangement if such companies desire to do so.

The PMA firm will obtain the right to utilize the land in issue as well as the ability to apply for the right to construct buildings on that land as part of such an arrangement. Such land’s building rights can also be mortgaged to a third party.

5. Rights to use

The right to use is a right to utilise land for any purpose as well as to collect products gained from the ownership of such land. This is available to:

  • Indonesian citizens

  • Indonesian business entities

  • Foreigners who are living in Indonesia

  • Foreign business entities currently operating in Indonesia

  • Representatives of foreign countries or international institutions

  • National & regional government institutions & agencies

  • Social & religious institutions

The duration of the right to use is limited and the right is also transferable under certain circumstances.

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FAQs

Can companies own land in Indonesia?2021-11-19T12:13:43+08:00

Indonesian citizens can own these rights, as can legal entities (such as PT/limited liability companies) establish under Indonesian law and domiciled in Indonesia, either for 100 percent foreign-owned, joint venture or 100 percent Indonesian-owned companies. 

What is the condition of Indonesia’s housing market today?2020-04-02T14:50:47+08:00

The latest statistics show that the average price of houses in Indonesia’s 14 largest cities increased by 0.16% over the one-year period which concluded at the end of the first quarter of 2019. Over this same period, there was a significant increase in sales of residential properties in Indonesia. Such sales increased by 23.77%. Despite these statistics, however, property prices in Indonesia are lower than in previous years if one adjusts for the effects of inflation.

Can foreigners own land in Indonesia?2020-04-02T14:50:10+08:00

Foreigners are allowed to own land in Indonesia. They also have the right to build on such land. This is because the government believes that the granting of such rights to foreigners provides a significant degree of legal certainty regarding ownership of property and land. This legal ownership is expected to increase the level of property investments across Indonesia.

What are average land costs in Indonesia?2020-04-02T14:49:14+08:00

Across the world, land prices have been increasing. They are the primary reason why global housing costs have increased dramatically in recent years. In Indonesia, such has also proven to be the case. However, it is certainly possible to purchase land at a reasonable price in Indonesia. In the least expensive areas of the country, land may cost as little as 40 million rupiah (US$2,800) per 100 square meters. On the other hand, land in the most expensive areas of the country may cost up to 300 to 400 million rupiah (US$21,200 to US$28,300) per 100 square meters.

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